Executives at collapsed Iceland bank jailed for fraud

REYKJAVIK Dec 28 (Reuters) - Two former executives at an
Icelandic bank which collapsed in the 2008 financial meltdown
were sentenced to jail on Friday for fraud which led to a 53
million euro loss, in the first major trial of Icelandic bankers
linked to the crisis.

All three of the small North Atlantic island's top banks
collapsed in quick succession in October 2008 due to big debts
incurred during a rapid overseas expansion.

Glitnir was the first to fall after the collapse of Lehman
Brothers caused international credit markets to freeze up.

A Reykjavik court sentenced Glitnir's former chief
executive, Larus Welding, and former head of corporate finance,
Gudmundur Hjaltason, each to nine months in jail, of which six
months were suspended for two years. They had denied the
charges.

Prosecutors said the two approved a loan to a company which
owned shares in Glitnir so that the company could in turn repay
a debt to Morgan Stanley.

The decision, taken outside the regular decision-making
process, meant Glitnir was too exposed to the company and cost
the bank at least 53.7 million euros ($71 million), the
prosecution said.

The sentence was less than the jail terms of at least five
years demanded by Iceland's special prosecutor, who is looking
into alleged wrongdoing connected to the crisis.

"We have a conviction, which is of course the main thing,"
prosecutor Holmsteinn Sigurdsson told reporters outside the
courtroom when asked whether he was disappointed with the length
of the sentence.

The special prosecutor is also looking into alleged
wrongdoing linked to the collapse of the other two former top
banks, Landsbanki and Kaupthing.
($1 = 0.7563 euros)
(Reporting by Omar Valdimarsson; Writing by Patrick Lannin in
Stockholm; Editing by Pravin Char)